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UniCredit's Polish banks boost profit on cash loans, one-offs

Bank Pekao SA and Bank BPH SA, the Polish lenders being merged by parent UniCredit SpA, said Q4 earnings advanced as Poles took out more cash loans before Christmas and as BPH booked a one-off gain.

Net income at Bank Pekao SA increased 15% to 467.5 million zloty (€120 million), while at Bank BPH SA profit rose 13% to 350.7 million zloty, the Warsaw-based banks said in statements. „The earnings show a certain slowdown of volume growth, a sign both banks are shifting their attention to preparation for the merger,' Marek Juras, an analyst at Bank Zachodni WBK SA's brokerage, said today by phone. „This isn't mirrored in profits. Pekao should be evaluated very positively, and even though BPH's net was lower than expected, it was still good.”
The banks will unite this year to create Poland's largest lender, overtaking state-controlled PKO Bank Polski SA as demand for banking services booms. Economic growth and record-low borrowing costs are driving the housing market in Poland. The €243 billion ($320 billion) economy grew by 5.8% last year, while the benchmark interest rate remained at a record-low 4%. Shares of Pekao rose 2.1% to 248 zloty at 10 a.m. in Warsaw, giving the lender a market value of 41.4 billion zloty. BPH stock advanced 0.7% to 973 zloty, valuing the lender at 27.9 billion zloty.

Net interest income, the difference between money paid on savings and earnings from loans, rose 7.2% to 641.5 million zloty at Pekao and advanced 9.1% to 553 million zloty at BPH, according to the statements. At BPH, the volume of consumer loans and corporate deposits both increased by about 20%, the bank said. Fees and commissions increased 18% at Pekao and by 24% at BPH.
UniCredit SpA is wrapping together its Polish banking businesses by spinning off some assets of BPH and integrating the rest with Pekao. The transaction was initially blocked by the Polish government during a six-month standoff. Both banks reported higher costs. They gained 11% to 403.3 million zloty at BPH amid higher wages for employees. At Pekao, administration costs rose 3.7 to 632 million zloty as it started to consolidate its Ukrainian business in the Q4. The cost-to-income ratio at Pekao totaled 50.3% and 46.7% at BPH.
The consolidation of Pekao's Ukrainian unit „influenced costs negatively as revenue from this operation is still not too high,” Juras said. BPH sold 1.04 billion zloty of non-performing loans to an investment fund in December. This bolstered pretax profit by about 40 million zloty, according to Andrzej Powierza, an analyst at PKO Bank Polski SA's brokerage. At Pekao, cash loans increased to 628.2 million zloty from. The bank also boosted its investment funds' assets, part of a strategy to shift money from regular savings accounts. (Bloomberg)